It didn't take long. The Chinese stock apologists are out in full force.
They didn't want to wait to see the full fallout of from the trashing of Didi (DIDI) investors here. They simply say that Didi had been in trouble with the authorities already, so what's the big deal? The after-school stocks, the profits-turned-into-non-profits? An aberration these apologists say. Of course, the government had to crack down on these schools. They were filled with regular teachers, who, rather than help all students, chose to help the privileged few. So what did you expect from the government? Of course they had to make these companies non-profits, free to all.
Of course? Previously in trouble? No recourse but to hurt these companies?
Are you kidding me? These are shocking moves that would never be tolerated here. Nor would we ever accept the lack of disclosure that so many Chinese companies have that list here. I know the Securities and Exchange Commission wants to crackdown on this issue and the Chinese government wants to work closely with the SEC to rectify the situation.
The apologists don't want to wait. They have mentally cordoned off companies that could be in trouble -- ones that are too capitalistic and encourage making money while creating class divisions. They don't want the people to be dumbed down by social media. They don't want companies to work their employees too hard.
But, otherwise, it's all systems go. They want you in Alibaba (BABA) , which reports Tuesday morning. They love Baidu (BIDU) , the online search company like Google that reports on Aug. 12 and they are talking lay-up. They also think it is time to buy Pinduoduo (PDD) , an online technology platform for agriculture.
And, I say: Wait one second.
We really don't know which kinds of companies the government is going to target. I see one pattern: The Chinese government doesn't favor the rich and wants their influence diminished. Anyone in the billionaire class has the ability to run rings around the government and they want that changed.
We really don't know which kinds of companies the government is going to target.
I also think that after the Chinese government reported slower numbers this weekend, the Chinese must do something to be sure their economy doesn't slow too hard. My colleague Larry Williams is questioning how well that economy is doing and it's not that good; he thinks it will get worse before it gets better. He sees a lot of downside to the market, given a correlation he has discovered between U.S. government economic data and the Chinese economy that shows we aren't done with the brutal decline we have seen there.
Me? I am deeply skeptical about the Chinese government and its minions that tell you the crackdown is over. I think this is merely an interlude, some sort of interregnum, to suck U.S. capital back into the country and get people from here to prop up stocks. It's obviously working if money managers are already on air dismissing what the government did as arbitrary, but necessary to "authoritarian capitalism."
That's nonsense. The Chinese want trade as long as we subsidize their activities including the military. They want money from initial public offerings, and they are willing to let us win on a few. Most of all, what they want is to beat us, pretty much in everything and they crackdowns are ways to show who is boss both at home and abroad.
Throughout history we have seen dictatorial regimes take tough actions and then let them subside as more new suckers apologize for them and say it was all one-off. That's where we are. You can play it. You may even make some money.
But, to me, I thought that the regime showed its true colors with the after school crackdown and the Didi fiasco. If you are rich, you are a target and that means they will strip you of your wealth, and if the collateral damages are losses by U.S. investors, so be it. Worthy cause.
